Market movers today
In the US, capital goods orders figures are due for release. Overall, business investments have been increasing since 2016 but over the past couple of months numbers have moved sideways – probably due to lower growth in the manufacturing sector. Figures for April will give us an impression of whether investments have stabilised temporarily or more persistently.
In the UK, the second estimate of GDP growth in Q2 will also attract attention for two reasons. The first is because the initial estimate of only 0.1% q/q was lower than expected by most economists. The second is because it is the first time we get the expenditure components so that we can see why growth was weak from a demand perspective.
In the euro area, German ifo expectations are released, where consensus is for another decline following the weak PMI numbers earlier this week.
In Scandinavia, today’s key release will be Norwegian unemployment data for May (see next page).
Selected market news
Yesterday was another session with risk-off sentiment in global financial markets amid geopolitical tensions with the US-North Korean summit cancellation. In general, global equity markets where under pressure and 10-year US and German government bond yields edged lower.
Yesterday, Italian government bond yield spreads tightened versus Germany from the morning after President Sergio Mattarella approved Giuseppe Conte’s nomination as premier Wednesday. During yesterday’s session though, Italian government bond yield spreads re-widened versus Germany. We expect a slow convergence between Italian government bonds relative to the core EU in the coming months, but there are a number of risk factors ahead.
ECB minutes for the April meeting released yesterday revealed little news. On the back of the minutes German government bonds continued the rally, most likely in line with other ‘usual’ risk-off dynamics, which sent the 10-year German government bond yield some basis points below the 0.5% level.
In the US, Fed Chairman Powell speaks today. The FOMC minutes released Wednesday showed that the Fed discussed the recent flattening of the US yield curve. Hence, amongst other things, it will be interesting to look for further Fed thoughts on the risk of a yield curve inversion and potential impact on Fed’s monetary policy.
